1. Health and Accident Insurance review
Health and Accident Insurance
Uses of Health Insurance
Definition: Health insurance provides protection against the financial consequences of illness, accidents, injury, and disability.
Covered Perils: Primarily accident and sickness.
Categories of Health Coverage
Medical Expense Insurance
Reimburses insured for medical care costs (e.g., Medicare supplement insurance, long-term care insurance).
Disability Income Insurance
Replaces lost wages due to disability.
Accidental Death and Dismemberment Insurance (AD&D)
Provides a lump-sum benefit for accidental death or dismemberment.
Interim Coverage
Short-term policies for gaps between jobs or new policies.
Health Insurance Premiums
Annual payments with potential periodic increases.
Calculated based on factors like interest, expenses, benefits types, and morbidity.
Benefits depend on the amount of loss, not fixed.
Subrogation
Insurer's right to recover losses from a third party responsible for damages (e.g., suing an at-fault driver after an accident).
Business Needs for Health Insurance
Categories of Business Uses
Business Continuation Plans
Ensures operations continue during a key employee's disability.
Employee Benefit Plans
Support employees affected by a disabling sickness or injury.
Business Continuation Plans
Business Overhead Expense Insurance
Reimburses overhead expenses for disabled business owners to maintain operations.
Premiums are tax-deductible, but benefits are taxable.
Disability Buy-Sell Plan
Facilitates selling a disabled owner's stake in the business.
May include a lump-sum payment and is structured as a binding arrangement.
Key Person Disability Insurance
Provides monthly benefits to cover costs for a vital employee's replacement during disability.
Employee Benefit Plans
Definition: Include health insurance and other benefits (life insurance, vacation pay, etc.).
Employer Benefits:
Enhances employee morale and productivity.
Helps attract and retain employees while potentially reducing wage demands.
Provides tax deductions for employer contributions.
Nature of Group Health Insurance
Contractual Structure: Between the insurer and the group (often the employer).
Master Contracts: Employers hold master policies and pay premiums; employees receive certificates outlining their benefits.
Advantages of Group Plans:
More extensive benefits than individual plans.
Higher maximums and lower deductibles.
Coverage typically predefined in conjunction with benefit schedules.
Enrollment Periods
Probationary Period: New employees must serve time before being eligible for group health insurance.
Enrollment Period: Limited time for members to sign up for the group plan.
Coordination of Benefits
Purpose: Avoid duplicate payments when covered under multiple group health plans.
Establishes primary and secondary carriers for claim payments to ensure costs do not exceed allowable medical expenses.
Particularly relevant for couples or workers with Medicare coverage.
Funding of Group Insurance
Group insurance has lower out-of-pocket costs due to shared administrative expenses.
Contributory vs. Noncontributory Plans:
Noncontributory: Employer pays all premiums, requiring full member participation.
Contributory: Employees share premium costs, with less than 100% participation required.
Group Health Premium Determinants
Factors include group size, claims experience, and member ages.
Options for employers:
Shared Funding Arrangement
Minimum Premium Arrangement
Retrospective Premium Arrangement
Self-Funding Arrangement
Underwriting Group Insurance
Objective: Evaluate the group's overall risk to mitigate adverse selection. Recognizes stable, persistent groups as lower risks.
Evaluates reasons for the group's existence, stability, and claims history before acceptance.
Preexisting Conditions and HIPAA Requirements
Under HIPAA, exclusions for preexisting conditions are limited to those treated in the last six months, with a maximum exclusion of 12 months.
Individuals can transfer health plans without gaps exceeding 63 days.
HIPAA Protections
Portability: Allows continuous coverage when changing jobs.
Conversion Privilege: Enables conversion of group policies to individual plans post-employment, independent of insurability.
Privacy Rule: Protects individual health information, requiring notices of information practices every three years.
COBRA Continuation of Benefits
Guarantees continuation of group coverage for terminated employees (barring gross misconduct).
Coverage Duration: 18 months post-termination, may extend for disabilities.
Employees can convert group coverage to individual policies upon expiration.
Pregnancy Discrimination Act
Prohibits discrimination based on pregnancy, requiring equal treatment in group plans.
Group Health Insurance Coverages
Group plans include basic medical expense, major medical coverages, dental and vision care, along with various supplement plans.
Ensures benefits are determined based on collective agreements between the employer and insurer.
Tax Treatment of Group Health Plans
Employer contributions are tax-deductible as ordinary business expenses.
Employee premium contributions are generally not tax-deductible.
Benefits received by employees under medical expense plans are not taxable.
Accidental Death and Dismemberment Insurance (AD&D)
Provides benefits for accidental death or dismemberment, with specified lump-sum benefits based on severity.
Policies cover lists of injuries with varying benefits based on the degree of accident severity, with pure accident coverage.
Special Coverage Types
Limited Risk Policies: Cover specific risks with defined benefits.
Special Risk Policies: Tailored for unique hazards not included in standard accident and health insurance.